Defense Contractor Agrees To Pay United States Up To $7.8 Million to Settle False Claims Act Investigation

SAVANNAH, GA: Arena Event Services, Inc., which does business as Arena Americas, has agreed to a settlement with the United States to resolve allegations that it wrongfully obtained small business set-aside contracts with the Department of Defense.

According to the settlement agreement, the United States contends that Arena Americas worked with Military Training Solutions, LLC (“MTS”) to obtain small business defense contracts that were supposed to be performed by MTS, but in reality were performed by Arena Americas. As a result of this scheme, which was perpetuated at Fort Stewart, Ga., and at other military installations across the United States, millions of dollars in defense contracts wrongfully were awarded to Arena Americas instead of legitimate small businesses.

“This settlement represents a dedicated effort to protect the taxpayers so we can be sure that those who do business with government agencies, particularly the military, do so entirely above board,” said Bobby L. Christine, U.S. Attorney for the Southern District of Georgia. “The U.S. Attorney’s Office will not tolerate any attempts to illegally exploit the system for a company’s personal advantage.”

Congress mandates that a certain amount of government contracts go to small businesses as a way to encourage small business growth. These contracts prohibit the small business from being affiliated with a non-small business, while also limiting the amount of work that can be subcontracted to a non-small business.

Through its investigation under the False Claims Act, the United States determined that Arena Americas paid MTS to bid on and obtain small business contracts that ultimately would be performed by Arena Americas. MTS previously entered into a settlement agreement with the United States to resolve its liability under the False Claims Act, and MTS owner Robert Obradovich pled guilty to one felony count of receiving unlawful kickbacks in a similar scheme.

“This issue was run to ground by the diligent efforts of our special agents along with our federal law enforcement partners," said Frank Robey, director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit. “We are very pleased with this civil settlement agreement pertaining to AES.  This should be a clear indicator to others who might try to manipulate government contracts and requirements: No matter how deep one tries to bury the evidence, we will find it.”

“This settlement is the result of the Defense Criminal Investigative Service’s (DCIS) commitment to ensuring that American tax dollars spent in support of Department of Defense programs and missions are protected from fraud throughout the procurement process,” said Special Agent in Charge John F. Khin of the DCIS Southeast Field Office. “DCIS and our partnering investigative agencies continue to work tirelessly to investigate the misuse and abuse of contracting methods that ultimately undermines the mission of our warfighters.”

“This settlement sends a strong message that lying to gain access to the Small Business Administration’s preferential contracting programs will be met with justice,” said SBA Office of Inspector General Eastern Region Special Agent-in-Charge Kevin Kupperbusch. “SBA’s preferential contracting programs are intended to promote the economy and grow and develop small businesses across the nation. I want to thank the U.S. Attorney's Office and our law enforcement partners for their dedication and hard work throughout this investigation.”

Christopher Pilkerton, General Counsel for the SBA, added, “The outcome in this case is the product of the enhanced enforcement efforts by federal agencies, such as the Small Business Administration, working with the U.S. Attorney’s Office and its Joint Procurement Fraud Strike Force, as well as other Federal law enforcement agencies to detect procurement fraud and prosecute those individuals and companies that engage in such activity. These efforts will continue to ensure appropriate use of taxpayer dollars.”

The Arena Americas settlement resulted from work of the Southern District of Georgia’s Procurement Fraud Task Force, which investigates fraud at military bases in the Southern District of Georgia. The Procurement Fraud Task Force previously has been responsible for numerous criminal prosecutions and civil settlements from fraud arising out of Fort Stewart, Fort Gordon, Hunter Army Air Field, and the Kings Bay Naval Submarine Base. If you have information about any individual or entity that you believe may be engaging in fraud at a military base, please contact Assistant United States Attorney J. Thomas Clarkson at 912-652-4422.

The claims resolved by the settlement agreement are allegations only, and there has been no determination of liability.

U.S. Attorney Bobby L. Christine commended the hard work and dedication of the United States’ investigatory team, which was led by Special Agent Bryan Cofer of the Small Business Administration Office of Inspector General, Special Agent Randall Temples of the Defense Criminal Investigative Service, and Special Agent Daniel Chase of the Department of the Army Criminal Investigation Command.

Assistant United States Attorneys J. Thomas Clarkson and Jonathan A. Porter represented the United States in this investigation and settlement.

For any questions, please contact Barry Paschal at the United States Attorney’s Office at (912) 652-4422.